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Investing.com-- Stifel analysts downgraded their rating for Cheniere Energy Partners LP (NYSE:CQP) (CQP) and reduced the price target citing limited upside and overvaluation after a recent rally.
The investment firm set a price target of $51, down from $50, suggesting a potential 19% downside from CQP’s current price. It downgraded the stock rating to “Sell” from “Hold”.
Stifel analysts noted that the stock has surged since the U.S. elections amid expectations of easier expansion for the Sabine Pass facility. However, they argue that too much optimism is already priced in, particularly as the company’s Sabine Pass Stage 5 expansion is unlikely to be operational before 2030.
The analysts highlighted that despite the planned capacity increase at Sabine Pass, CQP’s earnings growth will be constrained due to its contractual setup.
Specifically, non-contracted LNG volumes are sold to Cheniere Marketing at capped margins of $3 per mmbtu, limiting potential upside, Stifel analysts added.
Stifel also pointed out that while distributions could eventually reach $4.50 per unit, this is not expected for at least five years. In the meantime, distributions are likely to remain flat, and the current 5.2% yield could face pressure if LNG prices decline, analysts wrote.
“We expect the valuation to drift lower in the coming quarters," Stifel analysts wrote.
The downgrade reflects Stifel’s view that CQP units are overvalued relative to the constrained growth outlook and limited capacity to capitalize on market volatility.